Hansen Natural: Building an Empire – Prefab Style

Monster Energy’s international build-up seems to be getting some serious traction after yesterday’s announcement that Hansen Natural (HANS) – Monster’s parent company –, The Coca Cola Company (KO) and Coca Cola Enterprises (CCE) signed a distribution agreement (additional financial information here). Covered markets will include selected territories in the U.S., Canada and six Western European countries (including mini states Luxembourg and Monaco).

Earlier I mentioned how Monster Energy might be falling behind in international markets versus Rockstar Energy. And although Hansen’s CEO Rodney Sacks characterized Monster’s  international progress as “Rome wasn’t built in one day”, this deal with Coke looks a lot like empire building prefab style. Opening up several new markets and having access to the Coke system of bottlers and distributors is a major step and emphasizes Monster’s proven brand strength.

The table below shows new international markets where distribution has recently commenced or is imminent (with population size and GDP per capita). The countries of France, United Kingdom, The Netherlands, Belgium, Luxembourg and the city-state of Monaco fall under the new Coke agreement. The French market is especially interesting, since arch rival Red Bull has only been allowed distribution since this spring, making it the only big Western market where Red Bull (apart from its reputation) doesn’t have as much of a headstart as in other countries.

Now new markets almost outnumber the U.S. domestic market when it comes to population. Monster Energy has been distributed for some time already in Canada (pop: 33.4 mln; GDP/capita: $38,400) and Mexico (pop: 106.7 mln; GDP/capita: $12,800). Note that about 25% of HANS sales still comes from California, even though Monster represents about 90% of their sales.

For developed countries the market for energy drinks is roughly estimated to be $10 per capita at a manufacturing/wholesale level, at which Hansen Natural operates. Although no two markets are the same, and Monster’s success shouldn’t be extrapolated 1:1 to these new regions, these new markets alone present a $2.5 bln opportunity. Who needs Rome…

Disclosure: Author holds a long position in HANS

Comments

[Ermilo:]

This is a good quality company that is at a great discount, great product and will be growing as you see gasoline stock prices go down which means......more Monster drinks being sold, since that is where alot of their products are sold. Long Hansen!

2008 Oct 07 01:03 PM